Demand Side Transcript

Today on the podcast, Jeffrey Sachs of Columbia University and the Earth Institute. On Europe and on the Climate. From Bloomberg Surveillance with Tom Keene.

SACHS

Listen to this episode

Saying we are economically lashed to carbon based energy is like saying we have to keep hammering nails into our skulls to have a functioning economy.. The cheaper the nails the better. Maybe we could come up with another way of keeping our hats on. Something more sustainable.

We can create technologically advanced rail with the same engineers who create technologically advanced carbon gas producers.

Energy saving retrofitting. Energy conscious construction.We can build transcontinental DC transmission lines that are not a threat to anybody’s water, conduits for Midwest wind energy to New York City lights with no transmission loss. We can begin to reorganize the sprawl into livable space. There are a million and one essential things that could be done beginning right now. We have the people, God knows, waiting to do something.

Why don’t we do it?

It costs too much.

How ridiculous is that? The cost of not doing this is potentially cataclysmic.

But the cost of doing it is too much. Reinhardt and Rogoff have given cover to this nonsense. First by saying government borrowing and debt is the cause, not the result of the economic collapse. Then by saying in essence to cut the government’s participation in the economy.

Look at the acres and plateaus of McMansions and the towers of luxury condos. These created the modest expansion of the George W. Bush years, along with the immense debt incurred to build them. We still have the homes. And we still have the debt. Less than ten years ago, this was the private market’s idea of what we should invest in.

The financial sector made lots of money, and lost lots of money, much of which is still yet to be accounted for in a methodical and legitimate manner.

Now every lever known to government has been pulled for the benefit of banks and private markets. the premise is that we will go back and build what we used to build in the bubble years or before -- sprawl and cars and vending stands for Chinese goods. We’re borrowing a trillion dollars a year to keep the cash flow going through the federal government. The Fed is sponsoring any project your corporation wants to build at two percent interest.

Is it working?

No. It’s not working. It won’t work. It cannot work.

Saving the banks. Floating them on easy money and direct and indirect bailouts won’t work because it doesn’t recognize the obvious fact of their decadence and corruption and it doesn’t lead to any productive investment to pay back even zero percent loans.

This is disgusting. As Sachs says. On one hand the climate crisis is breaking around us like one of its violent storms. On the other hand the only thing we can afford to do seems to be to bend over for a financial sector bent on doing nothing but helping itself to whatever it can reach.

Sorry. I get exercised. but the money to do this is at hand. Interest rates are very low because the private sector doesn’t want to invest. (See deflation indicators.) And if we don’t get the economy moving toward a useful future, who is going to want our money?

Pressing and obvious need: Addressing climate change, as you heard here, just getting to square one in the organization.
Capacity in plant, equipment and people lying idle
Investment capital decaying in bank vaults and 101(k)’s.


The only financially responsible thing to do is to cut employment in government?

Give me a break.

The only financially responsible thing to do is to let those who don’t want to participate sink in their own quicksand. That is the banks and the corporations who are hoarding cash.

The fiscal cliff is the triumph of jargon over substance. What is the fiscal cliff? Austerity on one hand, if we allow it to go into force. What kind of Austerity? The end of free cash flow to consumers and thence to consumer-oriented business through the government.That is the overwhelming effect of the current fiscal situation. Tax cuts sold as stimulants to the economy, temporary events, or surely not to be needed once the economy was going again. It is the same argument for tax cuts we’ve seen since George W. rode to office. We did it in 2001 and 2003. How well did it work?

The fiscal cliff is the policy Germany prescribes for the rest of Europe. Heck. Greece and Spain are Amish in their finances compared to the U.S. Many times the current account deficit of any other country. Deficits that continue.

The Ryan budget, end the deficits without ending the tax cuts means financial chaos. It is actually impossible on its face, with the multiplier effects of such draconian measures. Three years ago, the ECB said to Greece, cut your budget, confidence will return, you won’t lose access to bond funding. How well did that work out? Two years ago it was Italy. Last year Spain. Just sacrifice your populations to the bond vigilantes and they will release the confidence fairy.

Not working. Won’t work. Cannot work.

The idea may be to push Medicare and Social Security off the fiscal cliff. I don’t know.

What if we actually required consumers and businesses to pay for services currently being received. Armageddon.

These would not include current spending on Social Security and Medicare. Notice they are still in the black. Today, tomorrow, next year. The unfunded liabilities are in the future. The trillion dollar deficits are here and now, with the Republican controlled Congress. They are paying for military, debt service, government facilities, not Social Security and Medicare.

Remember when Al Gore suggested we put Social Security in a lock box.

The military budget, the non-entitlement budget has been floating for years on borrowing from Social Security and Medicare Trust Funds. Now it turns out that it’s not the borrowing that is the problem, it’s the paying back. Your and my taxes have been lower for decades because we didn’t count borrowing from Social Security as borrowing.

Okay... I’ll stop.

I realize all this is well clear of anything currently on a public agenda. Probably sounds like every other crackpot on the radio.

Elsewhere government for sale, the corporate republic, is now in campaign mode, where dollars are translated into votes by a sophisticated slur machine. Fortunately for us in Seattle, we are not in a swing state. My sympathies to those of you who are.

Also. I don’t watch TV. And I can shrink the screen on my computer to lop off the ads. And the podcasts -- as you know -- are wonderfully light on advertisement.

None lighter than Demand Side Economics. Check out the book at DemandSideBooks dot com

The whole Demand Side empire. No ads. At least none generated by us. If you do see ads on your screen, let us know. Demandside at live dot com.

We’ll root them out of there.